The Bank of England is in an incredibly frustrating situation. Although it has stated its desire to continue its path of policy tightening, it finds itself being held hostage by the ongoing Brexit negotiations. Until it knows the outcome of Brexit, the bank will be unable to make any further interest rate adjustments.
Even more frustratingly, UK data continues to strengthen, highlighting the resilience of the economy despite the uncertainty around Brexit. The latest earnings and employment data released today have no doubt added to this sense of frustration.
Unemployment Rate Hits 4%
Data released today by the Office for National Statistics showed that the unemployment rate fell once again in the three months to November, hitting 4%. This was better than the expected unchanged reading of 4.1% and came alongside a further 141k rise in the number of people in employment which now stands at record highs of 32.54 million people. This again was above the forecast increase of 88k.
Average Earnings Grow At Quickest
Earnings data was similarly upbeat for the period with average earnings, excluding bonuses, jumping 3.3% and average earnings including bonuses rising by 3.4%, marking the fastest pace of wage growth since July 2008.
The data is very encouraging, leading the BOE to hope that the British government successfully passes a well-supported Brexit deal to minimize any damage to the UK economy and allow the Bank to continue increasing interest rates.
GBPUSD remains hemmed in by the bearish channel top which was briefly broken last week. If price trades back above this structure, the next key level to watch is a test of the structural resistance at 1.3304, a break of which is needed to signal a bullish shift.